Nordic American Tanker: Be Prepared for Fluctuations

Nordic American Tanker (NAT) has announced it has purchased an additional double-hull suexmax tanker. This will give them 13 tankers in service and 2 new-buildings on order. The price of the tanker was $56.7 million, delivery will be in mid March and it will be immediately accretive to earnings. Nordic American has no debt and an unused $500 million credit line. To quote the press release: “The acquisition is expected to be financed from out of the Company’s financial resources.”

Also in the press release was the news that the 4th quarter dividend is expected to be approximately 85¢. This is a drop from the $1.50 to $1.60 range of the last few quarters, but still a 10% yield on the current stock price. Spot rates per day averaged in the $40k range. My observation of the spot rates for the quarter put my guess at the average rates closer to $50k and I was expecting the dividend to be around $1.20. Missed by quite a bit!

NAT contracts almost all of its tankers on the spot market and dividends will fluctuate greatly quarter to quarter. I like the company because of its low cost structure, conservative management and long term dividend payout. Over time, Nordic American Tanker will provide a significant, high income to investors. Just be prepared for the fluctuations.

Disclosure: NAT is a component of my site’s Income and Opportunities Portfolios and a personal holding.

Comments

[notsosmart:]

did well by FRO & NAT. in fact all of FRO stock was paid for by the dividends.oil got to move no matter what.i have no agenda.

Jan 06 01:38 PM

[User 350053:]

NAT has no debt due to its policy of paying for its tankers through new issues. The latest of 3 million shares diluted the outstanding by 10%. The rather large 2nd an 3rd quarter payouts were not supportable from earnings which were outstanding. A .50 to .80 per share payout would be in line with earnings and would reassure me that this isn't another ponzi scheme. If you are going to dive in for the 10% be very careful where you pull the trigger, gaining 10 while losing 20 is not a good investment strategy.

Feb 03 02:12 PM